Assets and Liabilities: Key Classifications

Current Assets

  • Definition: cash & other assets expected to be converted to cash or used within 1 year or one operating cycle (whichever is longer).
  • Cash: currency, coins, checks on hand, bank balances.
  • Investments in Trading Securities: short-term, marketable equity investments.
  • Notes Receivable: formal promises to receive cash soon.
  • Interest Receivable: interest earned on notes, not yet collected.
  • Accounts Receivable: customer balances on charge accounts.
  • Advances to Employees: cash given, to be repaid through future service.
  • Merchandise Inventory: cost of goods held for sale at statement date.
  • Accrued Income: earned but uncollected income (e.g., interest before maturity).
  • Prepaid Rent: rent paid for future periods.
  • Supplies on Hand: consumable items (store/office) on hand.
  • Prepaid Insurance: unexpired insurance premiums (always current, even if >1 year).

Noncurrent Assets

  • Definition: assets held >1 year, not for sale, provide long-term benefits.
  • Land: ground owned; non-depreciable.
  • Building: operational structures; depreciable.
  • Equipment: machinery, tools; depreciable.
  • Furniture & Fixtures: office furnishings; depreciable.
  • Accumulated Depreciation: total depreciation recorded on depreciable assets (contra-asset).

Current Liabilities

  • Definition: obligations due within 1 year.
  • Accounts Payable: unpaid supplier invoices.
  • Notes Payable (short-term): written promises to pay within a year.
  • Interest Payable: accrued but unpaid interest.
  • Deferred/Unearned Income: cash received for future goods/services.
  • Taxes Payable: owed but unpaid taxes.
  • Accrued Expenses: incurred but unpaid costs (wages, utilities, rent).

Noncurrent Liabilities

  • Definition: obligations due after >1 year.
  • Notes Payable – Long-Term: written IOUs due in the long term.
  • Installment Contracts Payable: debts repaid in periodic installments over time.
  • Mortgage Payable: long-term, property-secured loan.
  • Bonds Payable: debt securities with periodic interest and later principal repayment.